Friday, 28 November 2014

As a penance for terrible sins
committed in a moment of insanity, the mythical hero Hercules was required to
perform ten great labours – extended to twelve after he cheated on two of them.
Similarly, David Cameron has today pledged to insist upon major changes
to the rules on free movement of EU citizens, failing which he will advocate
Britain leaving the European Union. He clearly considers this necessary in
light of the political sin of failing to meet his earlier promise to hugely reduce
the amount of migration to the UK – which was, in hindsight, made in a moment of
political madness.

Cameron’s commitments will not be
easy to meet, for the reasons I set out below. I have broken them down into a
list of specific commitments. I leave it to the classicists to match each of
them to Hercules’ tasks.

If no changes to EU free movement
law are made, the Prime Minister implicitly suggested that he would campaign for
the UK to leave the EU. He did not state that he would insist upon all of his suggested amendments being
agreed. So it is important to assess how realistic each of these proposals is.

A crucial factor in determining
what is politically realistic is the nature of the current EU legal rules. Where
Cameron’s proposals reflect the status
quo, they are obviously realistic. Where they would require EU legislative
change, they will require only a qualified majority of EU Member States in
favour, plus a proposal from the Commission and agreement of the European
Parliament. But where would need an EU Treaty amendment, they would have to be
agreed by all Member States and ratified by each national parliament. That isn’t
impossible, but it won’t be very easy; and it means that Cameron will more
likely have to compromise on the proposals made today.

What about the other political
parties? UKIP, of course, wants the UK to leave the EU. The Liberal Democrats generally
support benefit reforms, and the Labour party’s policy, as announced recently
is broadly consistent with Cameron’s proposals. The difference is that the
Liberal Democrat and Labour parties do not (or not yet) support a referendum on
continued UK membership of the EU.

As can be seen from the detailed
comments below, most of Cameron’s specific proposals will require a Treaty amendment. I have elaborated on some
of the points made below in my recent blog post on the legal limits on
the amendments to EU free movement law.

Specific proposals

1. No access to tax credits, housing benefits and social
housing for four years for EU citizens

For EU citizens who are not
workers, work-seekers or former workers, this confirms the status quo, as set out in the CJEU’s recent ‘benefits
tourism’ judgment in Dano (see
discussion of that judgment here).

For EU citizens who are
work-seekers, the free movement of workers in the Treaties (as interpreted by
the CJEU) requires Member States to give them access to benefits linked to
labour-market participation. These benefits would probably not be covered by
that rule. So this confirms the status
quo.

For EU citizens who are workers
(as defined by the Treaties and CJEU interpretation) or former workers (as
defined by EU legislation, and the CJEU interpretation of the Treaties), there
is a right to equal treatment as discussed in my prior blog post. So this change would require a Treaty amendment.

2. Removal if job-seekers do not
find a job within six months

For EU job-seekers, the EU
legislation states that they cannot be expelled as long as they ‘can provide
evidence that they are continuing to seek employment and that they have a genuine
chance of being engaged’. This reflects the case law of the CJEU, interpreting
the Treaties (Antonissen judgment). Therefore this change would require a Treaty amendment.

3. Ending the entry of non-EU family members without
restrictions

Currently EU citizens can bring
with them their spouse or partner, the children of both (or either) who are
under 21 or dependent, and the dependent parents of either. (As an exception,
students can’t bring their parents with them – but it’s rather doubtful that
many students would want to do that if they could). This applies regardless of
whether the family members are EU citizens or not. In 2003, in the judgment in Akrich, the CJEU ruled that
Member States could insist that non-EU family members had previously been
lawfully resident in the Member State concerned (previously no such rule
appeared to exist). But in 2008, in Metock,
the CJEU overturned this ruling and said that a prior legal residence requirement
was not allowed.

This rule could possibly be overturned by EU legislative amendment, but it is
possible that the CJEU would find that for those EU citizens whose rights are
based on the Treaties (workers, job-seekers, former workers, self-employed
persons, students), such a restriction was a deterrent to free movement, so a Treaty amendmentmight be needed.

In fact, Cameron’s speech
appeared to suggest that all non-EU family members of all EU citizens would have
to be subject to the same restrictive income and language requirements that
apply to UK citizens who seek to marry non-EU citizens. This would clearly
deter free movement of those EU citizens who have non-EU family members, and
would surely require not just a legislative
amendment but a Treaty change. These changes would therefore probably restrict the possibility of UK citizens to obtain family reunion by going to another Member State to be with their family and then returning, ie the so-called Surinder Singh route.

This assumes that re-entry bans
are possible at the moment for such persons. That’s clearly not the case for rough
sleepers and beggars: Article 15(3) of the EU citizens’ Directive states
unambiguously that a ban on entry cannot be imposed where a person was expelled
for grounds other than public policy, public security and public health; and
Article 27(1) states clearly that such grounds ‘cannot be invoked to service
economic ends’. This rule could possibly be overturned by EU legislative amendment, but it is possible that the CJEU would
find that this would constitute a disproportionate restriction on free movement
for those who were entering to obtain work later. So a Treaty amendmentmight be needed.

For those convicted of fraud, they
would arguably have been expelled on grounds of public policy, public security
and public health. In that case, entry bans are allowed, but EU law does not
set absolute upper limits on the duration of those bans. Instead, Article 32 of
the citizens’ Directive merely sets out a right to challenge them. So in
principle longer and stricter entry bans for fraudsters are possible, as a
matter of national law, under the status
quo. However, if Cameron wants to make sure that they cannot be challenged successfully
in individual cases as a disproportionate limit on free movement rights, a legislative amendment or Treaty amendment
might be necessary.

5. Stronger measures to deport EU
criminals

Currently, as well as possible
expulsion for not meeting the economic criteria for free movement, EU citizens can
be deported if they are a ‘sufficiently serious threat’ to public policy or
public security. Expulsion decisions must be made on a case-by-case basis and a
criminal conviction cannot automatically lead to expulsion. In principle, there
is a higher degree of protection against expulsion for those who have got
permanent residence status (due to living in a Member State for more than five
years) or who have lived in that Member State for more than ten years. However,
the CJEU’s case law has somewhat undercut that extra protection in practice.

Any changes to the rules on deportation
after a criminal conviction would require at the very least a legislative amendment. It is likely
that they would also require a Treaty
amendment, since the protection against removal on grounds of public
policy, public security or public health is set out in the Treaties for EU
migrant workers (Article 45(3) TFEU).

6. Longer waiting periods for
free movement of persons from new Member States

The details of each new Member
State’s adaptation to EU law are set out in each accession treaty, which has to
be approved by each Member State. The UK would be in a position to veto any
future accession treaties unless longer waiting periods for free movement are
included. So this is entirely consistent with the status quo.

7. EU citizens to have a job
offer before entry

EU legislation says that EU
citizens can stay for three months as long as they have a valid passport and do
not apply for social assistance. After that point, they can stay if they are
workers, self-employed persons, students or otherwise have sufficient funds.
Also they can stay if they are a job-seeker, subject to the proviso (described
above) that they have a genuine chance of getting work. So this proposal would
require a legislative amendment.

In fact, it would also require a Treaty amendment, since the CJEU has
said (in Antonissen) that the Treaty
right to free movement of workers also applies to job-seekers, giving them the
right to enter and stay in a Member State to look for work.

If such an amendment were made,
it would clearly be unfeasible in
practice, since it is not realistic to check at the border or before getting
on transport if all EU citizens have job offers, considering also that there
are many other legal reasons for EU citizens to come to the UK (short-term
visits, self-employment, for study, or self-sufficient stay).

8. No taxpayer support for
job-seekers

The EU legislation already rules
out social assistance for job-seekers, so this reflects the status quo.
However, the CJEU has said that job-seekers have a right to access benefits
linked to labour market participation, if they have a link already with the
labour market in question. While David Cameron suggested that the UK’s future
Universal Credit would not fall within the scope of the CJEU’s case law, that
would likely be challenged in practice. So a Treaty amendment is likely necessary as regards current rules, and
possibly necessary as regards universal credit.

9. Payment of child benefit to
children abroad

Non-payment of child benefit to
children living in other Member States is arguably indirectly discriminatory,
since it affects more non-UK nationals than UK nationals. Since the equal
treatment of workers is guaranteed by the Treaties, a Treaty amendment would likely be necessary to put this change into
effect as regards workers’ family members.

Wednesday, 26 November 2014

The EU’s fisheries policy is
controversial both within the EU and outside it, due to its impact on both fish
stocks and the livelihoods of fishing communities. Until the Treaty of Lisbon,
its application was essentially the sole preserve of the Council. The European
Parliament (EP) tried to obtain joint control of some of the external aspects
of the policy by claiming that its consent was needed for international
fisheries treaties that impacted the EU budget significantly, but the CJEU rejected
this challenge.

Following the Treaty of Lisbon,
however, the EP has joint decision-making power internally over agriculture and
fisheries policies, since Article 43(2) TFEU states that the ordinary
legislative procedure now applies to the adoption of legislation in this field.
However, certain aspects are still reserved to the Council, with the European
Parliament only consulted, namely ‘measures on fixing prices, levies, aid and
quantitative limitations and on the fixing and allocation of fishing
opportunities’ (Article 43(3)).

As regards fishing, this
provision is used each year just before Christmas, to determine the annual allocation
of fish between Member States. It’s safe to say that the tone of these usually
bitter negotiations never induces fisheries ministers to kiss each other under
the mistletoe.

What exactly is the dividing line
between the areas where the EP shares power with the Council, and where
fisheries ministers are left to hold acrimonious discussions among themselves?
There are pending cases on the dividing line as regards internal EU
measures. But today the CJEU ruled on the division of powers externally,
in a case which also raised interesting issues of international law.

The judgment

Today’s judgment concerned a
Council Decision which awarded Venezuelan fishermen the possibility to fish in
the waters of French Guiana (which is a constituent part of French territory).
This confirmed what those fishermen had been doing for some time before. The EU
had felt it was necessary to put this practice on a more formal footing, but
the rather left-wing Venezuelan government did not want to sign a treaty with
such dastardly agents of global capitalism.

So the EU adopted an apparently
unilateral Decision on this issue. The Council believed that it fell within the
scope of Article 43(3), so the EP only had to be consulted, while the EP and
the Commission argued that it fell within the scope of Article 43(2), so that
the EP had the power of consent. The rules on the EP’s role in the approval of
international treaties to which the EU becomes a party are set out in Article 218
TFEU. Basically the EP has the power of consent whenever a treaty concerns an
issue regulated by the ordinary legislative procedure (ie fisheries law
generally), but is only consulted when a treaty falls within the scope of other
decision-making rules internally (ie the non-legislative procedure that applies
when the EU fixes and allocates fishing opportunities). (In fact, the rules on
the EP’s role in approving international treaties are slightly more
complicated, but only this basic distinction is relevant to today’s judgment).

But was the Council Decision an international
agreement in the first place? The Advocate-General’s opinion argued that it was
not. Rather, it was a unilaterally binding declaration, an interesting form of international
law. In fact such legal creatures are so rare that international law had not
yet clarified whether international organisations like the EU could adopt them.
In the Advocate-General’s view, they could. But that left the awkward question
of how exactly the EU could adopt one as a matter of its internal law, since Article
218 clearly only refers to agreements
concluded by the EU (or on behalf of the EU by its Member States). She
considered various options, but ultimately argued that the relevant provisions
of Article 218, including the powers of the EP to give its consent and receive
information on negotiations, as well as the special jurisdiction of the CJEU,
applied by analogy.

In the Court’s view, however, the
Decision did constitute an international agreement. It based itself on the relevant
rules of the UN Convention on the law of the sea, to which the EU and its
Member States (but not Venezuela) are parties, and confirmed its position in
the recent ruling on the Hague Convention on child abduction (discussed here), that treaties
could be concluded in two steps. In this case, the EU had extended an offer,
which Venezuela was free to accept, reject or suggest changes to. It had chosen
to accept.

As for the internal division of
powers, both the Advocate-General and the Court reached the same conclusion:
the Parliament’s argument was correct. In the Court’s view, the main powers
relating to agriculture and fisheries set out in Article 43(2) concerned ‘policy
decision[s] that must be reserved to the EU legislature’. In contrast, Article 43(3)
provided for ‘measures of a primarily technical nature’ to implement the
legislation adopted in the field. Applying that distinction to this case, the ‘treaty’
with Venezuela set out only a general framework, which had then been
implemented by further measures based on Article 43(3). So that ‘treaty’ could
not itself be based on Article 43(3); rather it was subject to the consent of
the European Parliament, as it was based on Article 43(2).

Comments

On the international law issue, the
Advocate-General’s analysis is more convincing than the Court’s, given the
clear unwillingness of Venezuela to engage in any formal negotiations along its
failure to ratify the UN Convention on the law of the sea, which the CJEU
relied on so heavily. Nor is the Court’s use of the language of contract law
very convincing. True, Venezuela’s application for fisheries authorisations
might be described as the acceptance of an offer, but what is the
consideration? Why should Venezuela’s actions be characterised in light of a
treaty it had not ratified? Possibly the relevant rules reflect customary
international law on the law of the sea which apply to Venezuela, but the Court
does not make that argument.

Nor is its analysis of the text
of the Law of the Sea Convention very convincing. The relevant clause refers to
making ‘agreements or other arrangements’ regarding surplus fish. Could not a
unilateral binding declaration constitute a form of ‘other arrangement’? Possibly
that interpretation has been rejected by the Law of the Sea tribunal or by experts
in that field of law (I confess that I’m not one), in accordance with the
sources of international law as defined in the UN Charter. But if that is the
case, the Court needs to bolster its interpretation by citing such evidence.

The distinction between the forms
of international obligation matters mainly as regards the EU’s internal law. If
the Decision was a unilateral binding declaration, the CJEU would have the
awkward job of deciding whether the EU can adopt such measures, and if so how.
Since the Court didn’t have to address these issues today, they must be
considered open. But if it is every necessary to consider them in future, there
is much to recommend the Advocate-General’s very thorough analysis of both of
these points.

As for the internal decision-making
rules, the judgment is more convincing, particularly in light of the Advocate-General’s
arguments that Article 43(3) cannot apply to everything concerning fishing
opportunities, since that would render the main legislative powers set out in Article
43(2) superfluous.

The broader implications of this
judgment remain to be seen. But it’s an early indication that the Court is
inclined to tilt in favour of a broad interpretation of the scope of the EP’s
legislative and treaty approval powers over agriculture and fisheries following
the entry into force of the Treaty of Lisbon.

Tuesday, 25 November 2014

Earlier this year, the Court of
Justice of the European Union (CJEU) ruled in the Digital Rights judgment against the validity of the EU’s data
retention directive, on the grounds that it provided for mass surveillance
without any effective safeguards. Subsequently it ruled against Google,
in what has become known as the ‘right to be forgotten’ judgment.

What are the longer-term
consequences of the Court’s ‘Privacy Spring’? An Irish court has already
referred the ‘Europe v Facebook’ case (discussed here) to the CJEU,
asking in effect whether the EU’s ‘Safe Harbour’ arrangement on data protection
with the USA is compatible with the rights to privacy and data protection, in light of the Snowden
revelations. Now the European Parliament (EP) has decided to refer the proposed
EU/Canada agreement on passenger name record (PNR) data to the CJEU,
asking if it is compatible with the rights to privacy and data protection in light of the Court’s
recent case law. That judgment would implicitly determine whether the separate EU/USA
and EU/Australia treaties on PNR data, and the proposed PNR Directive,
violate those rights also. And if the PNR treaties breach the rights to
privacy and data protection, it would then be more likely that the EU/USA treaty on banking
data transfers also breaches those rights in turn.

So, are we at the start of a ‘domino
effect’ of a series of EU laws and treaties being ruled in breach of the rights
to privacy and data protection by the Court of Justice, all falling in sequence now that the data retention
Directive has been overturned? Or are the features of the different measures
different enough to avoid this?

Background

There’s a little bit of déjà vu in
today’s decision by the EP to ask the CJEU about the EU/Canada treaty on PNR.
Back in 2004, it asked the Court to rule on the original EU/USA treaty on the
same subject. The Advocate-General’s opinionin that case ruled against
all of the EU’s arguments, including the right to privacy point. However, the
Court’s 2006 judgment only ruled on one of the EP’s legal arguments –
that the EU/USA treaty had the wrong ‘legal base’, and should have been approved
by using a different procedure (relating to police cooperation, instead of the
internal market). And that procedure meant that the EP had no role in the
approval of the treaty, or any power to ask the Court of Justice about its
compatibility with EU law.

Eight years later, the legal
environment is quite different. Since the Treaty of Lisbon entered into force
in 2009, the EP (or the Commission, Council or a Member State) can ask the CJEU
for rulings on the compatibility with EU law of EU treaties with third States on
police or criminal law cooperation. Indeed, this will be the first such ruling.
And while waiting for the Court’s ruling, the EP can prevent the EU/Canada
treaty from being concluded, since it now has the power of consent over such
treaties (back in 2004, the Council circumvented a separate request by the EP
for the CJEU to rule on the EU/USA PNR treaty by concluding that treaty without
waiting for the Court’s opinion). Furthermore, the substantive legal environment has obviously been transformed by the
Court’s ruling against mass surveillance earlier this year.

The CJEU had another chance to
rule on the right to privacy in the international context when the Commission
asked it to rule back in 2012 whether the international Anti-Counterfeiting
Agreement (ACTA) violated EU law. However, the Commission left it too late to
send its request to the Court, and the EP simply vetoed that proposed agreement
before the Court could rule (the Commission then withdrew its case). So we should
now get a long-awaited ruling from the Court on the compatibility of
international data transfers with the EU rights to privacy and data protection – unless the EP can
be talked into withdrawing its request to the Court.

The procedure which the EP has
invoked today is a special process which allows the Court to rule on the
compatibility with EU law of a draft treaty to be concluded by the EU (or by
its Member States on behalf of the EU), before that treaty comes into force. (For
Canadian readers: this process is broadly similar to sending a request to the
Supreme Court to rule on the constitutionality of a draft law. The EU process
only applies to treaties, though.) If the CJEU rules (probably in about 18
months’ time, unless the ruling is expedited) that the draft treaty is
incompatible with EU law, either the draft treaty has to be amended to comply
with the Court’s ruling, or (improbably) the EU Treaties themselves have to be
amended to permit its ratification.

The EU/Canada PNR treaty is
distinct from the EU/Canada treaty liberalising air transport (already
in force), and the proposed EU/Canada free trade agreement (CETA) – although the
latter treaty, along with the EU/USA free trade agreement now being negotiated,
will be indirectly impacted by a pending case in which the EU Commission has
asked the CJEU to rule on whether the EU/Singapore free trade agreement is
compatible with EU law.

Comments

So does the EU/Canada PNR treaty
violate the right to privacy? There’s a detailed analysis of the broader impact
of the data retention judgment on other EU measures in a study by Boehm and Cole,
published earlier this year. So this is only a short summary of the issues discussed further in that study. The starting point is how to interpret that
judgment: does it rule out all mass surveillance, or just in cases where there
are insufficient safeguards? In my view, it does indeed rule out all mass
surveillance where it’s linked to EU law, and any draft treaty to which the EU
is party would obviously be linked to EU law.

But there’s a prior question:
when does a treaty with another State entail mass surveillance? The data
retention case concerned collection of data on all phone and Internet use in
the EU. This could be compared to the use of social media (in the pending Facebook
case), or to international banking transfers, but it’s harder to argue that collection
of data on all flights to a particular third country constitutes, by itself,
mass surveillance. Having said that, the proposed PNR Directive, which would
apply to all flights within the EU, would probably meet the criteria.

If (contrary to my interpretation)
the Digital Rights judgment does permit mass surveillance, as long
as there are sufficient safeguards, then what must these safeguards be? According
to the judgment, there have to be: definitions of the ‘serious crimes’ or other
purposes of the data exchange; rules on the subsequent access to the data; limits
on the number of people who can access that data; independent control by a
court or supervisory authority; strong rules on the data protection period; provisions
on protecting data from unlawful access and use; and a requirement to retain
the data within the EU only. Obviously, in the context of treaties with non-EU
States, the latter requirement must be understood as an obligation to retain
the data in the EU or that particular third country.

Do the EU’s treaties with third
States meet these criteria? This has to be assessed on a case-by-case basis. At
first sight, for example, the EU/Canada PNR treaty contains provisions
addressing all of these safeguards issues except one: the transfer of PNR data
to other countries, which is permitted (although subject to conditions). But it
might be argued that in practice, the right to privacy and data protection is
not protected as strongly under such treaties as it might first appear, due to
inadequacies in national legislation or practice, such as NSA access to
Facebook data or limitations on non-USA citizens claiming privacy rights in the
courts.

Finally, there’s an important practical
question here. Let’s imagine that the CJEU rules that the proposed EU/Canada
treaty violates privacy and data protection rights; or that it approves that
treaty, but its reasoning in that judgment casts doubt on the compatibility of
other EU treaties with those rights. How can those other treaties be
challenged, now that they are already in force?

Time has run out to bring
annulment actions against those treaties, or to ask the CJEU for an advance
ruling on their compatibility with EU law. But it is still possible for
individuals to challenge the application of those treaties via the national
courts (as in the Digital Rights and
Facebook cases). Or the EP could argue that in order to secure effective protection
of rights under the EU Charter of Fundamental Rights, the other EU institutions
must take steps to denounce the treaties concerned. If they don’t do so, the EP
can sue them for ‘failure to act’ as set out in the EU Treaties.

Monday, 24 November 2014

Much public debate in recent
weeks has centred upon the possible amendment of EU rules on the free movement of
people. In particular, the think-tank Open Europe and the UK Labour party have
set out policies on this issue, and Prime Minister David Cameron is expected to
make an announcement of his views soon. While most of the discussion focuses on
the political and economic aspects of these proposals, there is also an
important legal dimension to the debate, because EU law determines how easy (or
difficult) it would be to put any potential changes into effect.

In particular, there are three principal
ways to change the EU free movement rules: (a) by changing national law, while
still remaining consistent with EU law; (b) by changing EU legislation; or (c)
by amending the EU Treaties. The first course of action needs only (at most) a
national parliamentary majority; the second course of action needs a Commission
proposal and support from the European Parliament and a qualified majority in
the Council; but the third route needs unanimous support from all 28 Member
States’ governments, then ratification in national parliaments.

So it’s important to know which
of these categories the proposed reforms fall into. For the reasons set out in
this blog post, some of the proposals of Open Europe fall into the second
category (EU legislative amendment). But contrary to their arguments, the most
significant proposals made by Open Europe fall into the third category (Treaty
amendment), making them much more difficult to accomplish than their authors
suggest.

As for the Labour party
proposals, they broadly reflect the Open Europe suggestion to impose a waiting
period on access to in-work benefits for EU migrants. Finally, it’s obviously
not possible to comment on David Cameron’s proposals for EU policy reform (which
might go beyond EU free movement law) until he makes them. So this blog will
return to the issue after his forthcoming speech.

This blog post is in three parts:
an analysis of the proposals on cutting back benefits for workers, job-seekers
and former workers; an examination of the other proposals made by Open Europe; and my suggested text for proposed amendments to EU legislation to implement those Open Europe proposals which are (in my view) both desirable
and legally feasible.

Cutting back workers’ benefits

The central proposal of
Open Europe today is that newly-arrived EU citizens should be denied equal
treatment as regards out-of-work or in-work non-contributory benefits, social
housing and apprenticeship schemes for a period of between one and five years,
to be negotiated. This suggestion builds upon another recent Open Europe paper
which suggests further details of changes to EU legislation on these issues. My
comments are mainly directed at the latter paper, which sets out the legal
reasoning underpinning today’s proposal. As noted already, the Labour party proposals reflect Open Europe's suggestions, and so the following comments equally apply to those proposals.

I won’t mince words: there’s a fundamental
legal problem at the core of these proposals. The Open Europe paper suggests
that both in-work and out-of-work benefits could be limited simply by amending EU
legislation. This is true for those EU citizens who are not workers, and who
have never looked for work or held work in the host Member State, as the CJEU
has recently clarified in the ‘benefit tourism’ case of Dano (see discussion here). But look at the Court’s
reasoning: it deferred to the wording of EU legislation in that case because
the Treaty rules on the rights of EU citizens (Articles 20 and 21 TFEU) defer
to the limitations on EU citizens’ rights ‘defined by the Treaties and the measures adopted thereunder’, and ‘laid down in
the Treaties and in the measures
adopted to give them effect’. Equally the Court referred to Article 18 TFEU,
which provides for non-discrimination against EU citizens ‘[w]ithin the scope
of application of the Treaties, without prejudice to any special provisions
contained therein’.

For people like Ms. Dano, there
are no Treaty rules which govern their legal situation, because she was not a
worker, and was not a job-seeker or former worker either. Neither was she a
self-employed person, service provider or student. Therefore the Court only
looked at her position under EU free movement legislation.

But the vast majority of EU
citizens in another Member State do fall within one of those other categories –
most notably as workers, including job-seekers and former workers. The crucial point
here is that all of those other categories of EU citizens have rights not just
pursuant to EU legislation, but also
pursuant to the Treaties. Indeed, that point is recognised in the very
wording of Articles 18, 20 and 21 TFEU: Article 18 defers to the special rules
on non-discrimination in the rest of the Treaty, while Articles 20 and 21 defer
equally to the Treaties and secondary legislation. The intention of the Treaty
drafters is perfectly clear.

So what does this mean for the
position of workers? (I’ll concentrate on them, since they are the main focus
of the Open Europe proposals). The specific Treaty provision regulating workers’
free movement is Article 45 TFEU, which first specifies that ‘Freedom of
movement for workers shall be secured within the Union’. Article 45(2) further
specifies that free movement entails the abolition of discrimination between EU
workers as regards ‘employment, remuneration and other conditions of work and
employment’. Article 46 TFEU then confers powers to adopt legislation ‘setting
out the measures required to bring about freedom of movement for workers’.
Article 48 TFEU sets out powers to adopt rules to coordinate social security
for workers.

The wording of these Treaty
articles doesn’t defer to the legislation in order to set out workers’ rights,
and this has long been recognised by the Court of Justice. So free movement of
workers (and the associated right to equal treatment) has long been recognised
in CJEU jurisprudence as a directly effective Treaty right, precisely because
it is not dependent on the adoption
of further measures. This also means that the CJEU controls the definition of ‘worker’,
and extends it to cover also those who are former workers or job-seekers.

Indeed, as recently as this
summer, in the Saint-Prix case
(discussed here), the CJEU expressly asserted that the definition of
former workers (and therefore the access to benefits) as defined in EU
legislation didn’t matter, since the Court would determine which former workers
still qualified for access to benefits. So the Court ruled that female workers
who were former workers at the time when they gave birth still had access to
benefits (as long as they got work soon afterward), even though the legislation
did not define them as former workers.

So unless the CJEU does a U-turn
on this issue, there would be little point in trying to amend the legislation in
order to require former workers to wait longer for benefits. At the moment, EU
citizens retain worker status, and access to benefits, if they become
involuntarily unemployed after working for more than one year in a Member State.
If they become unemployed before that point, they retain worker status for a
maximum of six months. There are also several other cases where they retain
that status.

What about job-seekers who were
not formerly employed in the host State? Well, there’s no need to amend EU legislation
in order to refuse them some types of
benefits, since the EU citizens’ Directive expressly makes clear that they are
entitled to no equal treatment as regards ‘social assistance’ at all. However,
the CJEU has said (in the Collins
case) that, pursuant to the Treaties, job-seekers cannot be refused equal
treatment as regards benefits which are intended to facilitate access to
employment. And in the Vatsouras
case, it expressly distinguished this type of benefit from ‘social assistance’
benefits which job-seekers are not entitled to pursuant to the citizens’
Directive.

The CJEU will have a chance to
clarify the position in the pending case of Alimanovic.
It might possibly do a U-turn on this issue in its judgment on that case. If it
doesn’t, then again, in order to cut back on such labour-market benefits for
job-seekers, a Treaty amendment would be necessary.

Next, as regards workers, the key
free movement rule, and the equal treatment right, are laid down in the Treaty
itself. When ruling on workers’ equal treatment rights, the Court regularly
refers to the Treaty rule and the relevant
legislation, and both of these confer equal treatment as regards benefits: see
the judgment in O’Flynn, for
instance. Since the right to workers’ equal treatment is expressly set out in
the Treaties, then removing in-work benefits for workers – the core of the Open
Europe proposal – would be manifestly contrary to the Treaties, and would
require a Treaty amendment.

Of course, a Treaty amendment is
not impossible; it’s simply much more difficult than a legislative amendment.
It would most likely take the form of a Protocol which sets out a derogation from
the Treaty rules.

Other Open Europe proposals

The Open Europe paper suggests an
amendment to EU legislation to specify that EU law cannot derogate from
national powers as regards matters such as social assistance. It’s not possible
for EU secondary legislation to limit EU powers as defined in the Treaties, but
an amendment to EU secondary legislation could refer to such limits. This is my
suggested amendment 1 below.

In the context of a waiting
period for benefits, the Open Europe paper correctly mentions that the time
period spent in detention in the home State for committing offences does not
count for this purpose. This rule is set out in the case law, but it could also
be added to EU legislation. This is suggested amendment 2 below.

Next, the Open Europe paper
suggests a number of protections for national workers as regards unfair competition
from other Member States. It is suggested here that the EU posted workers’
Directive provides such protection, but this isn’t always the case. So I
suggest an amendment to that Directive in order to overturn the controversial CJEU
judgment in Laval(amendment 3).

The specific suggested amendments
relating to unfair recruitment standards, living wages et al can best be
addressed by amendments to the specific Regulation on the free movement of
workers. My suggestions to this end are set out in amendment 4.

Finally, the Open Europe paper
gets round to suggesting some protection for migrant EU workers in areas other than employment, on the grounds
that the proposed three-year waiting period for equal treatment ‘might contribute
to a sense of vulnerability on their part’. The report’s authors should win an
award for their contribution to the great British art of understatement here.
One could equally say that the Titanic’s collision with an iceberg might have contributed
to a sense of dropping body temperature on the part of its passengers.

Open Europe's specific suggestion is to
adopt EU legislation protecting EU migrant workers against discrimination on grounds of nationality
as regards supply of goods and services. This is possibly superfluous in light of the
non-discrimination rules in the Treaty. But to be on the safe side, I have
suggested amendment 5, to the Regulation on migrant workers.

Finally, a number of specific
statements in the Open Europe paper need correction or clarification. On page
3, there are more than two ‘important protections’ (for States) as regards
exceptions from equal treatment for benefits. Nor is sickness insurance a
requirement for all EU citizens, only those who are not workers or
self-employed. The Brey judgment (text
at note 6) has been effectively overturned by Dano, which was delivered after this paper was published. Equal
treatment applies only to those EU citizens who are legally resident. Former workers are entitled to benefits not just
in the cases referred to in note 9. On page 9, the CJEU has yet to rule whether
Article 31 of the EU Charter of Fundamental Rights creates justiciable rights;
this issue is the subject of the pending Fenoll
case. It’s an overstatement to say that national law giving effect to Charter
social rights is always protected by EU law, as the CJEU judgments in Laval, Viking Line and Alemo-Herron
make clear.

This Directive shall not affect
Member States’ competence to define national rules on social assistance and
social security (including pensions), public health, public education and employment
policies, in accordance with the Treaties.

Amendment 2

Add a new sentence to Article 21
of the citizens’ Directive:

Periods spent in prison as the
consequence of a conviction for a criminal offence shall not be taken into
account.

In particular, equality of
treatment as regards pay shall be assured as regards all collective agreements,
whether or not they are covered by the definition set out in paragraph 8.

Amendment 4

Regulation 492/2011 on the free
movement of workers should be amended to add a new Section 1a, ‘Equal treatment
of host State workers’, consisting of a new Article 6a:

Member States shall not permit
recruitment of or advertising for employment to nationals of other Member
States only.

A new sentence should be added to
Article 7(1):

The principle of equal treatment
in working conditions applies in particular to any rule relating to wages, including
a minimum wage or living wage requirement in the host Member State, as well as
any rules relating to health and safety.

A new Article 7(5) should be
added:

In order to ensure a dignified standard
of living for workers exercising free movement rights, Member States may
prohibit bonded agreements or tied housing.

Amendment 5

A new Article 7(6) should be
added to Regulation 492/2011:

Workers shall enjoy equal treatment
without discrimination on grounds of nationality as regards access to and
supply of goods and services which are available to the public.

*Note: This would be enforceable
in the way that the Open Europe paper suggests, by means of the Directive on
enforcement of migrant workers’ rights, adopted in 2014.

Sunday, 23 November 2014

The Court of Justice has recently
proposed that the EU should double the number of judges on the General Court,
and abolish the EU’s Civil Service Tribunal. Why did the Court propose such a
dramatic change to the EU judicial system? And is it a good idea?

Background

The development of the EU
judicial system has been dominated by a steady increase in the volume of litigation,
leading to disputes over how best to manage this workload. Traditionally, the
solution has been to increase the number of EU courts. So the Single European
Act, in force 1987, amended the Treaties to give the EU the power to establish
a Court of First Instance (later renamed the ‘General Court’ by the Treaty of Lisbon)
to assist the Court of Justice with its tasks. This power was used to create
that Court in 1989; both Courts have always had one judge per Member State.

As the case load of the Court of
Justice continued to increase, more and more of that Court’s jurisdiction was
transferred to the Court of First Instance, so ultimately that Court had jurisdiction
for almost all actions brought against the EU’s institutions, agencies and
other bodies. As an exception, the Court of Justice still has jurisdiction over
such cases if they are particularly ‘constitutional’ in nature, namely actions
brought by the EU’s institutions against each other, and challenges by Member
States to the EU institutions’ essentially legislative acts. The Court of
Justice hears appeals from the judgment of the Court of First Instance (now the
General Court), and retains full jurisdiction over the other types of EU law
proceedings, mainly references from national courts for a preliminary ruling
and infringement actions against Member States for breach of EU law.

Yet over time, this transfer of
jurisdiction to the Court of First Instance overburdened that Court in turn. So
the Treaty of Nice, in force 2003, gave the EU power to create a lower tier of
EU courts, called ‘judicial panels’ (renamed ‘specialised courts’ by the Treaty
of Lisbon). Only one such specialised court has been created: the EU Civil Service Tribunal, which began its work in 2005. It has seven judges.

But as the EU built more courts,
more litigants came. By 2011, the CJEU was again trying to find a way to cope
with the increasing volume of litigation. This time, instead of suggesting the creation
of a new Court, it proposed that 12 more judges be appointed to the
General Court. At the same time, it also proposed other amendments to the Court’s
statute, as well as the creation of a class of temporary judges to
assist the Civil Service Tribunal.

Member States in the Council, as
well as the European Parliament (the ordinary legislative procedure applies to
such changes), adopted the proposal on temporary judges for the Tribunal,
as well as most of the other proposed changes to the CJEU Statute. But
they did not adopt the increase in the number of judges on the General Court. While they agreed with
the increase in principle, they could not agree how to share the extra judges
among Member States, or how to rotate the appointments between them.

While these discussions dragged
on without any conclusion, the backlog of cases at the General Court has
continued to rise. And from this autumn, the situation at the Civil Service
Tribunal has begun to worsen as well, with the Council unable to fill two
vacant slots due to the same arguments about the principle of rotation.

So the Court of Justice has made
a new proposal: to double the number of judges in the General Court to two/Member
State, while abolishing the Civil Service Tribunal. This would take place in
three stages: 12 new judges in the near future, transfer of the seven Tribunal
judges in 2016, and appointment of the remaining nine judges from 2019. It
remains to be seen whether the European Parliament and the Council will accept
this proposal.

Comments

Undoubtedly, some remedy is
necessary to deal with the ever-increasing workload of the General Court. The
EU has an obligation under Article 47 of the Charter of Fundamental Rights to
deal with cases within a reasonable time. While the new judges will cost money,
failing to appoint them will cost money too: as the Court’s proposal points
out, there are now cases pending seeking damages because the EU judicial system
has failed to uphold the obligations imposed by Article 47.

There are two options available to
this end (without a Treaty amendment): the creation of more specialised courts,
or the addition of more judges to the General Court. (It should be noted that
the planned ‘Unified Patent Court’ is not
a specialised court, but a form of shared national court; for more details, see
last week’s blog post on the developing EU patent system).

The EU’s judges disagree among
themselves which of these two options is best. It was an open secret, at the time
of the 2011 proposal, that the General Court judges wanted to create more
specialist courts, but the Court of Justice’s preference for appointing more General
Court judges prevailed. In the 2014 proposal, there is no longer an attempt to
hide this disagreement: it’s openly acknowledged that the Court of Justice and
Civil Service Tribunal favour the proposal, while the General Court does not.

Why this difference of opinion? One
reason is that EU judges look forward to dealing with civil service cases about
as much as a cat looks forward to a bath. The judges at the General Court
thought they had got rid of these cases forever (except for appeals from the
judgments of the Civil Service Tribunal). Indeed, there’s a rumour that on the
day that Tribunal was created, every shop in Luxembourg ran out of champagne. But
now, to the horror of its judges, these cases seem set to return to the General
Court.

On the other hand, the judges of
the Civil Service Tribunal, after years of dockets consisting entirely of
feuding functionnaires, can look
forward to ruling also on bolshy Belarussians and money-grubbing monopolists in
the near future. Of course, by the time that the General Court consists of
twice as many judges as the Court of Justice, the former will outnumber the latter - although the Court of Justice, not the General Court (or the CJEU as a whole), which has the power to make proposals to amend the rules. (So does the European Commission).

Viewed objectively, which of
these solutions is best? The Court’s proposals make a number of good arguments for increasing the number of General Court judges. First of all, there is a good case that the creation
of specialist courts is less flexible, since litigation can increase in areas
not within their jurisdiction (such as foreign policy sanctions, in recent
years). Also, the creation of such courts does not necessarily solve the
workload problem, since the cases most suitable for such courts (like trademark
disputes) are often easy to deal with, and about a third of such cases will be
appealed to the General Court anyway. Moreover, it makes sense to keep such
disputes closer to the Court of Justice (via means of appeals from General
Court decisions), since that Court has to deal with similar cases in this context
of references from national courts on the EU’s trademark Directive, and on the
relationship between intellectual property law and EU free movement and
competition law.

Furthermore, it takes longer to
set up a new specialist court than to appoint more judges to the General Court.
While it is possible in theory to deal with the ‘national representation’ issue by
ensuring that there is one more judge per Member State across the General Court
and a number of specialised courts, the Court of Justice is right to believe
that it will be difficult to operate such a system in practice. The Council’s
recent illegal refusal to appoint judges to the Civil Service Tribunal has shown that it values pork-barrel politics more than the rule of
law.

Finally, the most recent proposal
will have the singular advantage of simplifying the EU judicial system,
eliminating an entire tier of courts as well as the complex rules applying to
screening whether the Court of Justice ought to review a judgment of the
General Court on an appeal from a specialist court. This would make the EU’s
judicial system easier to understand for the general public – and in
particular, for the beleaguered students of EU law.

Thursday, 20 November 2014

Bankers are never going to win a
popularity contest. The collapse of international financial markets which
started in 2008 and has led to austerity across Europe has been widely blamed
on lax regulation of banks and irresponsible behaviour by bankers. It has led
to a huge overhaul of EU banking regulation, including the transfer of banking supervision
to the European Central Bank, new rules on bank bail-outs, and provision for
criminal law sanctions against bankers involved in market abuse (discussed
here). EU law has gone further still, and adopted rules which cap the amount
of bonuses paid to bankers.

The United Kingdom, home to the
biggest financial services industry in the EU, has had reservations about some
of these new laws. It has opted out of some of them (the market abuse rules,
the banking supervision rules and aspects of the bank bail-out rules), and has
challenged others in the CJEU. Earlier this year, its challenge to the ban on ‘short-selling’
failed in the Court (see discussion here), and today’s Advocate-General’s opinion suggests that its challenge to the restrictions on bankers’
bonuses should fail too.

These restrictions are found in
the EU’s revised rules on capital requirements and the authorisation to take up
banking services, which are set out in a parallel Regulation and Directive
adopted in 2013. In effect, they require that bankers’ bonuses cannot usually be
more than the amount of their ordinary annual salary. By way of exception, the
bonuses can be double the amount of the banker’s ordinary annual salary, if
bank shareholders agree pursuant to a special procedure.

Advocate-General’s Opinion

The UK raised six main
complaints against the bonuses rules: lack of competence by the EU to regulate
pay; infringement of the principles of subsidiarity and proportionality;
violation of the principle of legal certainty; illegal delegation of power to
an EU agency (the European Banking Authority); breach of EU rules on data
protection and privacy, due to the potential disclosure of the pay received by
bankers; and a breach of the principles of customary international law, due to the extraterritorial effect of the rules. Advocate-General Jaaskinen argues
that all five complaints be rejected.

First of all, the Advocate-General
argues that Article 53 TFEU (the legal base for this measure) is correct,
because that legal base can extend to banking regulation generally, not just
the promotion of the freedom of establishment for banks. The pay cap does not
constitute a ‘social policy’ measure, since it does not regulate the basic salary paid to bankers, which is
the basis for calculating any additional bonus.

Secondly, data protection rules
are not violated, because the disclosure of bankers’ pay is only discretionary,
not mandatory. In the event that Member States make a request for such disclosure,
they would then be bound by EU data protection law.

Thirdly, conferring powers upon
the EU agency is not illegal, because the powers do not concern the essential
elements of the legislation, and the EU Banking Authority does not adopt the
measures itself, but merely recommends their adoption to the Commission. Fourthly, the principle of legal certainty is
not infringed by applying the new rules to pre-existing employment contracts.
Fifthly, the principles of proportionality and subsidiarity are not violated,
because the creation of a uniform system of risk management was better achieved
at EU level, rather than national level, and the EU institutions have great discretion to assess how these principles apply. Finally, the UK has not made out its argument that customary international law rules out the extraterritorial application of such limits.

Comments

This case is not about whether
limiting bankers’ bonuses is a good idea.
Rather it concerns whether it is legal for the EU to limit them. If the EU lacks such power, there would in
principle nothing to prevent Member States from limiting bankers’ bonuses
individually, if they wished. The argument about whether to do so would then be
held at a national level, rather than the EU level.

Some of the UK’s complaints are
clearly unconvincing. As the Advocate-General suggests, the argument about international law is not fully fleshed out or convincing. The legal
certainty argument fails to consider that employment law regulation usually
impacts upon existing contracts; this is justifiable in light of the
public-interest principles underlying the very nature of employment law. Anyway, bonuses are inherently variable. As for
the data protection argument, the Opinion largely follows what the CJEU
established already in EP v Council (family
reunion): if EU law provides for options for Member States, the compatibility
of those options with human rights law should be judged when and if Member
States exercise those options. In any event, prior case law on data protection
and salary disclosure does not set out an absolute ban on release (see Satamedia, for instance).

The UK’s other arguments are
rather stronger. While it is true to say that the EU’s banking agency does not
actually take the final decision relating to implementation of the bonus cap,
it does more than simply provide expert advice on this issue. The Commission
must then either act on this advice or do nothing at all: so it does not have
full discretion to adopt the delegated acts (see the complex decision-making
system set up by the Regulation establishing the Banking Authority). This process
is fundamentally questionable because it blurs the accountability for the
decision being taken (and moreover, it is too convoluted to be transparent).

As for proportionality and
subsidiarity, certainly the events of the last six years have demonstrably indicated
that a more decentralised system of managing banking risks was ineffective. Hopefully
the EU-wide measures will be more successful, but in any event the nature of
the subject-matter calls for an EU-wide response, in light of the level of integration
between European financial markets and the potential cross-border impact of
bank failures. But that isn’t the point: the UK is not challenging the entirety
of the capital requirements rules, but only some of the handful of provisions
which regulate bankers’ bonuses. In fact, it is not challenging those
provisions which prevent bankers from receiving bonuses as a consequence of risky
behaviour, but only those provisions which regulate bonuses regardless of bankers’ actions. So the
opinion should instead have asked whether these
provisions meet the requirements of the subsidiarity principle. It is hard to
see how they do.

This brings us to the biggest
problem with the Opinion: the argument that the legal base on freedom of
establishment can regulate bankers’ bonuses. The legal base point here can only
be understood by viewing the Treaty as a whole. It has separate provisions on
social policy, which include a ban on EU regulation of pay (Article 153 TFEU).
The general internal market power (Article 114 TFEU) specifically states that it
‘shall not apply to’ measures ‘relating to the rights and interests of employed
persons’. The Treaty drafters’ intention was clearly to provide for lex specialis rules relating to regulation
of pay.

The ban on EU regulation of pay
has been clarified in the case-law of the CJEU. In the Impactjudgment, for instance, it ruled that the EU could not
regulate the level or components of
pay, but it could establish non-discrimination rules relating to pay as regards
categories of workers. Similarly, the working time directive provides for
holiday pay, but does not regulate the level or components of pay which a
worker normally receives (which then constitute the basis on which the holiday
pay is calculated).

Following the logic of these precedents,
it is true to say that the capital requirements legislation does not set the level of bankers’ pay, on the basis of which
the bonuses are capped. But it does regulate the components of pay, by determining how much of the total amount of
pay can be variable. The Advocate-General’s reasoning would mean that the EU
would be free to regulate at least some aspects of workers’ pay in any area of
law subject to special rules in the Treaty, rather than the general internal market
legal base. So the EU could regulate aspects of the pay of farmers, fishermen,
transport workers and anyone in other service industries.

It could reasonably be argued
that aspects of pay in these other fields can exceptionally be regulated by EU
law where that is an essential component of the regulatory framework. This
could be the case in banking, for instance if the overall amount of pay could
damage the existence of the bank or bonuses were linked to risky behaviour. The
legislation does have rules on these issues, but the UK has not challenged
them. So it follows that the opinion is fundamentally unconvincing on the legal
base point.

In light of the financial crisis,
there are many good reasons to regulate banks more effectively, and it would
not be shocking if Member States
wanted to react to understandable public anger at the huge cost of bank
bail-outs by limiting bankers’ income. But resentment at bankers’ pay, even it
is entirely justified, cannot authorise the EU to exercise powers which any
reasonable interpretation of the Treaties suggests that it just does not have. Postscript (November 21st): Like any Advocate-General's opinion, this view is non-binding, although a number of British journalists and politicians forgot this when the opinion was released. In any event, the point is moot since, following publication of the opinion, the UK's Chancellor decided to drop the legal challenge. His official reason was to save taxpayers' money, but this is not convincing since a large majority of the legal fees will surely already have been incurred, and there is still a chance to get them reimbursed if the UK wins the case. A victory for the UK would have not have been improbable, given that the CJEU did not follow this Advocate-General's views in the last major banking law case (concerning the ban on short-selling), and that the analysis of the legal basis point is not very convincing.